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USD/HKD Back Close To April Highs, Despite US-HK Yield Differentials Edging Lower

HKD

USD/HKD is gravitating higher, the pair last near 7.8365. Earlier April highs were just under 7.8390 (back on the 11th). This month has seen dips in the pair back under the 20-day EMA as buying opportunities. This support point is trending higher and last around 7.8310.

  • Interestingly, there hasn't been much yield sponsorship on this recent rebound in spot USD/HKD. The US-HK 3 month rate differential sits off recent highs, last near +86bps. The divergence between the two series is modest, but most of the time we see both series moving in the same direction.
  • Weaker CNY spot levels are probably hurting HKD at the margin, while we may need to see more of a roll over in yield momentum before we see greater USD/HKD downside. This will arguably have to come via the US leg, with HK short term Hibor rates around multi month lows (this could change if we get to the top end of the peg band).
  • In the risk reversal space, the 1 month sits slightly above recent lows, last near -0.55.
  • On the data front, we have the March CPI out later. The market expects 2.1% y/y, unchanged from Feb. On Thursday we get March trade figures.
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